Equifax going to report balance/payment amount history? Is this good or bad?

[scmami]

Did I read this right?

Saw this today: http://www.bizjournals.com/atlanta/news/2016/09/26/equifax-makes-big-change-to-credit-reports-to-hel...

Can someone clarify if this will hurt or help someone looking to get a mortgage/refinance? (Sorry if this is posted elsewhere-I didn't see it in here or in the Mortgage forum)

[805orbust]

Well well well. Welcome to the age of utilization history. This ought be interesting. Doesn't matter to me cause I never carry balances, but it'll be disastrous for those who do and expect it to go away when they pay down. Now utilization will be kept track of for 24 months. 

On another note the new bill in Congress sounds good. Removal of negative items after 4 years instead of 7 or 10. I love the snippet about removal of negative info from the Great recession... just in time for all of it to fall off anyway. Such BS.

[scmami]

Oh yeah ALL of my baddies from that time are long gone. Yeah I don't see this as a great thing. I missed the 4 years rather than 7 bit though. That will be interesting!

[CreditGuyInDixie]

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@scmami wrote:

Did I read this right?

Saw this today: http://www.bizjournals.com/atlanta/news/2016/09/26/equifax-makes-big-change-to-credit-reports-to-hel...

Can someone clarify if this will hurt or help someone looking to get a mortgage/refinance? (Sorry if this is posted elsewhere-I didn't see it in here or in the Mortgage forum)

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If you are a person who has always been paying his credit cards in full every month, then it will help you.  If you have in the past occasionally or often carried a balance (i.e. not paid the amount on your statement in full) then it will hurt you.  People who PIF are called Transactors.  People who do not are called Revolvers.  Transactors are on average far less risky -- far less likely to become very late or default.

Here's an article about a piece of software called Desktop Underwriter, which almost all mortgage lenders use.  You'll see that DU as of last month now incorporates trended data and the T-R analysis in its assessment of home loan applicants.

http://brandmortgage.com/how-trended-data-will-affect-your-mortgage/

[pipeguy]

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@805orbust wrote:

Well well well. Welcome to the age of utilization history. This ought be interesting. Doesn't matter to me cause I never carry balances, but it'll be disastrous for those who do and expect it to go away when they pay down. Now utilization will be kept track of for 24 months. 

On another note the new bill in Congress sounds good. Removal of negative items after 4 years instead of 7 or 10. I love the snippet about removal of negative info from the Great recession... just in time for all of it to fall off anyway. Such BS.

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H.R.5282 - Comprehensive Consumer Credit Reporting Reform Act of 2016 introduced May 2016

FWIW, this bill is dead for the 114th Congress and never had much of a chance anyway. I'll avoid the "politics" of this bill, even though it has a lot to do with the messaging and introduction, but given Congress is in recess for the election season and when they come back it's going to be work on the budget only (mostly), a bill that has seen no committee action is NOT going to be brought to the floor of the House (it's a House bill without a Senate version). 

Note too that federal law does not require the CRA's to report negitive items for 7.5 years, that's just the maximum they can report them by law - meaning, the CRA's can change to 4 years anytime they want, but they won't because their "customers" aka lenders, perfer the longer timeframe. 

[gdale6]

Experian has been tracking this for years its nothing new. FICO doesnt consider any of it at this point.

[CreditGuyInDixie]

What's new is that Fannie Mae has made it part of their DU software, which means that mortgage applicants will now be analyzed by underwriters with these trended data in mind, particularly the T-R analysis.  That's never happened before, though the timeline for doing so was announced last fall.

FHA and VA loans appear to be exempt from the requirement to use trended data in the approval process. 

[scmami]

@CrediGuyInDixie yeah that's what I gathered. I know it doesn't affect FICO scores. I'm familiar with Desktop UW SW (used to work in subprime mortgages). I missed the FHA being exempt, but next time I refinance I want to get away from FHA if possible so it will be interesting to see how this affects me in a couple years. Guess I'll definitely be changing my habits. We only carry balances during a 0 interest period, so maybe we're not too bad off.

[805orbust]

Pretty sure that if there's a way to squeeze extra points out of people who pay their bills, it's only a matter of time before there's widespread adoption..

Not letting it spoil my weekend tho :-)

[CreditGuyInDixie]

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@scmami wrote:
@CrediGuyInDixie yeah that's what I gathered. I know it doesn't affect FICO scores. I'm familiar with Desktop UW SW (used to work in subprime mortgages). I missed the FHA being exempt, but next time I refinance I want to get away from FHA if possible so it will be interesting to see how this affects me in a couple years. Guess I'll definitely be changing my habits. We only carry balances during a 0 interest period, so maybe we're not too bad off.

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If it is important to you to carry large balances on 0% offers, here are a few things you can do to minimize the (possible) negative impact of that choice:

(1)  Make sure that you are clearly establishing yourself as a Transactor on all other credit cards.  You don't have to use all of your other cards every month, but make sure you use them at least once every six months, let the charges produce statements with a positive balance, let that get reported to the bureaus, and then pay it in full after the statement prints (maybe a week later, say).

Being a Transactor on all CCs is ideal.  But If you are acting as a Transactor on most of your credit cards, then that is much better than carrying a balance on several. 

(2)  On the one card that you are carrying a balance, make sure you are paying much more than the minimum payment.  I took advantage of a 0% card myself this summer but I was sure to make sure I was paying at least triple the MP each month and I made sure that I paid it off entirely as soon as was convenient   The statistical work that the CRAs have done (TransUnion did quite a bit of rsearch on this I think) showed that Rveolvers who paid only the minimum payment were much riskier than revolvers who always paid significantly more than the MP.

Finally, simply be aware that 0% deals are really not that great of a deal given current interest rates.  If the best savings accounts were earning (say) 8% interest, then a 0% offer would be really nice, since you could place the money you'd otherwise use to pay off the card in a savings account.  But the best savings accounts don't earn 8% now, as they did in the late 70s.  They earn 1%.  So the financial benefit to being a revolver is quite low, whereas the cost of being a revolver might be significant down the road for a person who wants a mortgage in a couple years (say).